Canada: Court Of Appeal Summaries (August 17 – 21, 2015)

Last Updated: August 26 2015
Article by John Polyzogopoulos

There were only two civil law decisions released this week by the Ontario Court of Appeal. One involved the enforceability of a settlement agreement in the employment law context. The other related to a dispute regarding relief ordered under the Family Law Act pursuant to a divorce order that included an obligation to make equalization payments and to pay section 7 expenses under the Federal Child Support Guidelines.

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Civil Case Decisions

Remedy Drug Store Co. Inc. v. Farnham, 2015 ONCA 576

[Epstein, Pepall and Benotto JJ.A.]

Counsel:

Matthew P. Sammon and Paul-Erik Veel, for the appellant

David Chernos, for the respondent

Keywords: Employment Law, Contracts, Rules of Civil Procedure, Rule 49.09, Offers to Settle, Settlement Agreements, Settlement Terms, Enforcement, Repudiation Simpliciter, Anticipatory Repudiation

Facts:

The appellant, Jane Farnham ("Farnham"), was employed as the General Manager and Executive Vice President by the respondent, Remedy Drug Store Co. Inc. ("Remedy"). In the last days of her employment, Farnham forwarded a large amount of emails to her personal computer and on her last day of work, she took home volumes of printed documents from Remedy's premises.

In response, Remedy began an action against Farnham for an injunction, damages and declaratory relief that she had breached her employment contract, fiduciary duty to the company and her duty of confidentiality. Remedy also brought a motion for interim injunctive relief on the issue of the confidential information Farnham was alleged to have taken from Remedy.

An agreement appeared to be reached through email, at which point Remedy's lawyers prepared a draft minutes of settlement. A disagreement arose between the two sides as to whether they had in fact reached an agreement, and if they had, whether Remedy had repudiated the agreement. Remedy's position was an agreement had been reached that included a term that a broad forensic sweep of Farnham's electronic devices would be conducted. Farnham believed that she had only agreed to a simple wipe of her devices and that Remedy's post-agreement emails had repudiated the settlement.

The parties eventually settled the injunction motion by agreeing that Farnham would place her personal computer in the hands of a third party until an agreement could be reached or a court order was issued. However, Farnham argued the continued existence of a scheduled injunction motion was evidence of repudiation, among other things. In response to the repudiation allegation, Remedy brought a motion to enforce the agreement. Remedy argued that it was not refusing to perform its obligations as set out in the settlement agreement but was only trying to clarify the terms. Farnham submitted that the post-agreement emails were more than a disagreement over the interpretation but rather an ultimatum to either agree to Remedy's terms or risk further legal action.

The motion judge found that the parties had entered into an enforceable settlement agreeing with Farnham that a forensic sweep had not been part of the agreement. He then ruled that Remedy's conduct did not amount to a repudiation of the agreement.

Issues:

(1) Did the motion judge err in failing to find Remedy's conduct amounted to a repudiation of the settlement agreement?

(2) Did the motion judge err in his consideration of rule 49.09 in the circumstances of this case?

Holding:

Appeal dismissed with costs on a partial indemnity basis.

Reasoning:

(1) The court found the Remedy did not repudiate the agreement. The Court enunciated the following framework for determining if repudiation of an agreement has occurred. The Court confirmed that timing is the only difference between anticipatory repudiation and repudiation simpliciter and so the same principles guide both analyses. When determining if there has been repudiation, the words or conduct of the party must be analysed to see if they indicate an intention not to be bound. The test for anticipatory breach is objective and the question is if a reasonable person would conclude that the breaching party no longer intends to be bound. Subjective intentions of the party can assist with determining the objective intention, but subjective intention is not determinative. The Court found that when considered objectively, Remedy did not show an intention not to be bound in the circumstances.

To find an anticipatory repudiation of an agreement, the conduct at issue must be considered serious. The breach must not deprive the innocent party of substantially the whole benefit of the contract. The insistence of a new term, as in this case, could only amount to an anticipatory repudiation if it was so important that the party wanting to rely on it showed an intention not to be bound. The Court found that the issue of the extent of the sweep of Farnham's personal devices would not deprive her of substantially the whole benefit of the contract.

The Court agreed with the B.C. Court of Appeal in Fieguth that in the context of settlement negotiations, anticipatory repudiation should be considered a "particularly exceptional remedy". The Court found that this was not one of those rare cases.

Finally, case law supports the conclusion that commencing a legal action in some circumstances does not necessarily constitute repudiation of an agreement. In this case, Remedy's injunction motion was found not to be inconsistent with the spirit of the settlement agreement.

(2) The Court briefly considered Farnham's arguments relating to rule 49.09 of the Rules of Civil Procedure. The Court found that the motion judge did not err in his consideration of rule 49.09 for mostly the same reasons the the Court found that Remedy did not repudiated the settlement agreement.

Rule 49.09 essentially states that where one party to a settlement does not comply with the agreed upon terms, the other party may make a motion for judgment on the terms of the accepted offer or continue as if there had been no accepted offer. The Court disagreed with Farnham's argument that based on rule 49.09, when the dispute over terms arose, Remedy could either proceed with its injunction or bring a motion to enforce the settlement but that it could not do both. The Court pointed to the importance of the fact that the injunction motion was brought before the settlement negotiations began as a reason why rule 49.09 should not be applied in this manner and that Farnham's argument would be a "triumph of form over substance".

The Court also disagreed with Farnham's argument that when Remedy insisted on a contractual term to which it was not entitled, Farnham was able consider the agreement terminated and continue as if there had been no offer to settle. Farnham argued that had the motion judge properly applied rule 49.09, he would have found that she had the right to, and did, treat the settlement as at an end. The Court found that the judge made no error and that it would be strange after having concluded that Remedy did not repudiate the settlement agreement, to allow Farnham out of the settlement agreement on the basis of rule 49.09.

Korman v Korman, 2015 ONCA 578

[Feldman, Cronk and Huscroft  JJ.A.]

Counsel:

  1. Waldmann and M. J. Armstrong, for the appellant
  2. K. Rayson and D. L. Solomon, for the respondent

Keywords:  Family Law, Divorce, Net Family Property, Equalization, Gifted Interest, Matrimonial Home, Income Imputation, Extraordinary Expenses, Federal Child Support Guidelines, ss. 7, Family Law Act, ss. 10, 14

Facts:

Isaac Michael Korman (the "Husband") and Susan Korman (the "Wife") married in 1988. They separated in 2009. The Husband applied for Divorce in 2010 under the Divorce Act, 1985, and for relief under the Family Law Act, 1990 (the "Act").

The parties have two children together. The eldest is approximately 22 years old and the youngest is almost 17 years old. The youngest is dependent on her parents. She has gone to private parochial schools her entire life. During the 2008 recession, the parents disagreed on her private education. The Husband wanted the child to attend public school, but the Wife refused. The Husband's mother helped pay for the child's tuition. The Husband argues he should not contribute to this tuition.

In 2002, the parties bought their Matrimonial Home ("Home") for approximately $560,000. They paid in full by using money from their jointly-owned first Home, joint savings, and money gifted by their parents. The Home was mortgage-free and title was place solely in the wife's name. Now, the Home is estimated to be valued at more than $940,000.

The Husband was an investment advisor and received a client complaint. The Wife said that the title to the Home was placed in her name to protect the Home from potential claims made against the Husband. The Husband insists that he did not intend to gift the Home to his Wife.

The Husband argues the trial judge imputed his income incorrectly by using the dividend income and monetary gifts from his parents. The Husband's parents gifted significant monetary gifts to the Husband to help support a more extravagant lifestyle and business ventures.

The Husband and Wife were granted a divorce at the end of the 8 day trial. The judge ordered the sale of the matrimonial home, the Wife to pay an equalization payment in favour of the Husband, and the Husband to pay child and spousal support, as well as education costs for the youngest child's private education.

The Husband appeals the orders.

Issues:

(1) Did the trial judge err in finding that the Husband gifted his interest in the Home to the Wife in 2002, when the parties acquired the property?

(2) Did the trial judge err in imputing income to the Husband based on gifts that one or both of his parents had given to him and on dividend income allocated to him?

(3) Did the trial judge err in treating the youngest child's private secondary school fees as a s. 7 extraordinary expense under the Federal Child Support Guidelines, SOR/97-175?

Holding:

Appeal allowed in part. The Husband is entitled to 50% of the proceeds of the sale of the Home, less his 50% share of the maintenance costs of the Home from V-Day to the date of sale. The Wife is entitled to a credit of $25,296 on account of the Husband's arrears in child and spousal support, plus further credit for additional arrears from April 1, 2015. The Home will be listed for sale and the recalculated net equalization payment be made to the Husband by the Wife from the net proceeds of the sale of the Home.

Reasoning:

(1) Yes, the trial judge erred because the Wife failed to meet her burden that the presumption of a resulting trust in respect of the Matrimonial Home had been displaced. Section 10(1) of the Act authorizes a court to determine questions of title, including whether legal title actually reflects beneficial ownership. Section 14 affirms the presumption of a resulting trust in determining questions of ownership when there are gratuitous property transfers. If the presumption is invoked, the party resisting the imposition of a resulting trust must disprove the presumption.

The Wife never said that the Husband gifted his interest to her, and the Husband never suggested that he intended to gift his interest to her. The judge's finding ignores the presumption of resulting trust that operates in favour of the Husband. Even absent the presumption, the evidence at trial does not ground a finding of a clear intention to gift. The Husband is entitled to a one-half share in any post-separation increase in the value of the property.

With regards to the effect of the Husband's ownership, the Wife says Martin v Sansome confines married spouses' property claims to the equalization provision in the Act, except in rare cases. The judge on appeal disagrees because that case is about unjust enrichment and does not apply.

(2) The trial judge erred on one issue regarding imputation of income by using declared dividend money, but was correct on including monetary gifts from his parents. Overall, there is no basis to change the trial judge's imputation of the Husband's income.

(a) The trial judge erred in calculating the Husband's income because the divided income should have been excluded because the Husband never received that money.

The trial judge considered the Husband's income from his employment, monetary gifts from his parents, and annual dividend money from the family's business. The Husband's actual annual income in the 3-years prior to trial was $134,858.73, more than the $120,000 per year the trial judge imputed to him. The Husband argued that the divided income should not be used because he never actually received that income. The Husband is a non-voting shareholder, and his mother controls the corporate and dividend declaration policy and allocations through her voting shares. The Husband declared dividends to reduce the mother's annual taxable income, but did not receive the money himself.

(b) However, the trial judge was correct by imputing global annual income to the Husband at $120,000. The gifts to the Husband by his parents should be included when imputing the Husband's income. There was a settled pattern of monetary gifts over many years and the gifts were substantial (between 1990 and 2009 the parents gifted almost $960,000). If the monetary gifting changed, it would be open to the Husband would need to request an adjustment.

This case is different from Bak v Dobell because a parent provided financial assistance to support a disabled adult child. The Husband supports himself and the monetary gifts help him maintain a certain lifestyle.

(3) The trial judge did not err in concluding that the youngest child's private education is a s. 7 expense. Section 7 extraordinary expenses are based on a two-part necessity and reasonableness test. The trial judge examined the child's best interests, that the child always attended private school, that the oldest child had graduated, and the Husband's financial ability to meet his share of expenses.

NB: The appeal decision provides additional commentary on the remedy and disposition of the trial decision.

(i) The Husband is entitled to an equal share in any post-separation appreciation in the value of the Home. He has not made any contributions to upkeep of the Home from the date of separation so he is liable for 50% of the expenses. The trial judge based part of the net equalization payment on the finding that the Wife is entitled to benefit from any post-separation increase in the value of the property because of her sole ownership in the Home.

(ii) The net equalization payment should be further reduced by $25,296, and that no interest should be payable on the equalization payment or on the Husband's outstanding support arrears. The Husband's child and support arrears are $82,794.

(iii) The Wife seeks an order that her obligation to make the net equalization payment be stayed and that that payment should serve as security for the Husband's ongoing support obligations until the obligations end. This request will not be granted because supporst are "until further court order". So, absent further court order, the Husband's obligations are indefinite which means the Wife's stay request would permit her to continue to live in the Home for an indeterminate period. This is inconsistent with the trial judge's division of assets.

Criminal Law Decisions

R. v. Ansari, 2015 ONCA 575

[Strathy C.J.O., Watt and Epstein JJ.A.]

Counsel:

John Norris and Breese Davies, for the appellant

Croft Michaelson and Amber Pashuk, for the respondent

Keywords: Criminal Law, Terrorist Group Activities, s. 83.18(1) of the Criminal Code, Evidence, Improper Admission of Evidence, Private Communications, s. 24(2) of the Charter

R. v. Shiwprashad, 2015 ONCA 577

[Weiler, Tulloch and van Rensburg JJ.A.]

Counsel:

Najma Jamaldin, for the appellant

Stacey Young, for the respondent

Keywords: Criminal Law, Robbery, Assault with a Weapon, s. 606(1.2) of the Criminal Code, Immigration, Deportation, S. 7 of the Charter, s. 15(1) of the Charter

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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